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The money was distributed late on Friday night following which lenders have formed a five- member committee to monitor the change of management until the company's reins are handed over to Authum Investments & Infrastructure, the successful resolution applicant, people familiar with the details said.
"This is the first completion of resolution for an Anil Ambani-company and also the first outside the National Company Law Tribunal (NCLT),” said a person aware of the resolution. “On Saturday, the Reserve Bank of India (RBI), too, has given its go-ahead for change of management of the company, which means barring a few procedural issues now, lenders can hand over the company to Authum this month itself."
Distribution of the funds means besides the recovery, banks can also gain in provision write- back on the account in the second quarter of the year.
Reliance Commercial and its twin Reliance Home Finance are undergoing resolution outside the NCLT in a process was initiated before parent Reliance Capital was admitted into insolvency.
Reliance Commercial had owed creditors Rs 9,017 crore. Authum has offered Rs 2,207 crore - a 75% haircut for secured creditors. It is largely funded by internal cash reserves accumulated in the debtor and also some cash payment by Authum.
"Authum has infused about Rs 250 crore that it had to under the plan which has been distributed among lenders on Friday,” said a second person aware of the deal. The rest of the money is accumulated in the company from recoveries made in the last three years since the company has been under stress. From the perspective of banks, this deal is now closed."
Secured creditors led by Bank of Baroda (BoB) control 87% of the debt, most of it in bonds issued by the company. The plan envisages 19% recovery for unsecured creditors, many of whom had voted against or dissented against the plan and 25% recovery for secured creditors.
NABARD, considered by banks as an unsecured creditor, has challenged the classification in the Bombay High Court. Its amount has been set aside in an escrow account, pending litigation, people familiar with the plan said.
State Bank of India (SBI) and Axis Bank, which were earlier dissenting creditors, also gave their assent to the plan on Friday, improving the numbers in favour of implementation of the plan.
NABARD is also part of the five-member committee to oversee the change of management until all approvals are in place. Other members of the committee are BoB, Union Bank of India, Punjab National Bank and Authum.
The plan was implemented after an order of the Supreme Court allowed creditors to go ahead with the resolution plan setting aside a Securities and Exchange Board of India (Sebi) plea seeking a stay on voting by creditors because it wanted all bond holders to participate in such votes, contrary to the debenture trust deed (DTD) and central bank guidelines that expect only 75% of the bondholders to vote.
However, the apex court has allowed dissenting debenture holders that constitute less than 5% of the debt to stay out of the plan. "How Authum deals with the dissenting creditors is now between them since the plan is now implemented," said the first person cited above.
More than 90% of Reliance Commercial loan book includes inter-corporate loans and loans to builders. Only some loans to small and medium enterprises and some loans to individuals have recovery prospects, according to bankers.
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